Over the past ten years, one question has loomed large in the minds of real estate investment professionals: what will inevitably be the next event to slam on the brakes? The good news is that we now have our answer.
New Haven’s international profile and high rental demand is attracting investors from around the Northeast region. Located along the I-95 and I-91 corridors, New Haven enjoys Amtrak and local rail service to both New York and Boston. The city is a thriving community of generational, ethnic, and educational diversity, and is home to a number of educational, healthcare, and cultural institutions. Its emphasis on education and health sciences contributes to steady job growth, while New Haven’s arts and entertainment scene makes it an enjoyable community to call home.
What is bringing Boston investors into secondary markets north of the city? Value-add opportunities in the Merrimack Valley are attracting investors who have been priced out of the Boston area. Situated along the northeastern Massachusetts and southern New Hampshire borders, this region is experiencing economic growth and improving demographics in submarkets including Lowell, Lawrence and Haverhill.
Bridgeport, Conn. represents one of the best multifamily investment opportunities in the state.
Low supply and high demand continue to define Boston’s multifamily housing market. With a finite amount of available land, adaptive reuse is becoming an increasingly popular way to bring new multifamily inventory to market at a time where the appetite for apartment housing – be it workforce level or luxury – seems nearly insatiable.
Multifamily units in close proximity to mass transit, jobs and lifestyle amenities remain at peak demand. Data shows that these walkable communities are attracting not just young professionals and the millennial generation, but also empty nesters who are selling their large suburban homes and migrating to cities. RENTCafe’s analysis of Census Data found that senior renters are actually the fastest growing renter segment in the U.S. and that the number of renters over age 55 has increased by 28 percent. Meanwhile, the National Association of Realtors found that 62 percent of millennials prefer living in walkable communities.
Gentrification is breathing new life into neighborhoods across Greater Boston. A recent report by Governing Magazine shows that since 2000, more than 20 percent of the Census tracts in Boston that were eligible for gentrification have done so, resulting in a 50 percent increase in home prices in some neighborhoods. Most recently, East Boston, South Boston and Dorchester have begun to reap the benefits of gentrification, spawning new development which is, in turn, driving up asking rents. As these neighborhoods come into their own, offering improved access to transportation and jobs, investors can benefit from buying undervalued Class-B and Class-C assets and making capital improvements that will lay the foundation for increased occupancy, sustained rent growth and higher returns.
Adaptive reuse and transit-oriented development are two prominent trends shaping the Northeast investment real estate market. As vacant office properties, abandoned mills and defunct retail assets are adapted for new uses such as multifamily housing, investors have opportunities to acquire Class-B and Class-C assets below market value and create the conditions to establish and maintain in-demand housing units.